Bernanke plan for Europe

Last week, the FED chief had a lunch with a group of leading bankers. According to what transpired, the main issue of this meeting was the economic situation in Europe. Apparently, Bernanke try to push them to take a more active role in the effort to rescue the European economy.

Some critics would say he is very naive. If they did almost nothing for the US economy in 2008, it would do something in Europe?. However, would find a better opportunity to benefit... once more.

What happens is the "artificial plan" of the FED is running a great risk if Europe is in more trouble. This plan requires that all stages  work to perfection. It all starts increasing the value of financial assets. Wall Street's rise increases "wealth" of people, they begin to spend more. This, creates a productive reactivation by increasing employment. After that, banks loans start to increase and finally began to recover the value of homes.

If the European economy is falling, the stock market will be affected and the whole house of cards would collapse. And the immediate problem of Europe is called "Euro". This common currency is in serious danger of disappearing, taking with it the hope of solution to economic problems of that continent.

As will be serious this situation, even the British Prime Minister David Cameron and his Minister of Economy, George Osborne, have publicly supported the continuation of the Euro. Apparently, the information that the Prime Minister Cameron has received from the Treasury of the United Kingdom and various advisers are very pessimistic.

The deactivation of the Euro could cause a major economic crisis in Europe, resulting in the collapse of many banks, creating a risk of another Great Depression. The trigger for this crisis might be, once again: Greece. Some German economists agree that Greece will be forced to leave the Euro soon.

Greece possibly will have elections in May and that date could be crucial. There is a risk that the new government could seek rescind the last debt agreement, triggering a series of events that could bind to Greece leave the Euro. Even in Europe is talk of a plan for it. Be decreed a bank holiday to "seal" all Euros in Greek banks, to demonstrate that it would broadcast again "Dracmas" (former Greek currency).

The source of the problem would be the austerity of the European countries (almost all). Previously, when a country was in trouble, they adopted a combination of fiscal and monetary policies. Thus, they sought to correct the fiscal deficit while promoting their exports. Now, one can implement fiscal policies, as the currency are concentrate in the Euro.

German Chancellor, Angela Merkel has been rushed out in font of these rumors, reinforcing its position of maintaining the common currency. The problem is the economic situation in some European countries is so critical that will be a permanent risk of waiting to "out" of the Euro.

In Spain, for example, youth unemployment has reached 45%. A further round of deficit cut could trigger social an political situation very difficult to control. Given these risks, it is not clear to what is willing to make the FED, but they know that all risk is placed on that continent.